Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: August 26, 2015 FILE NO.: WR 127736

Assessed Person(s): Robert Michael Gainey Appellant(s): Robert Michael Gainey and Rob Welsh Respondent(s): Municipal Property Assessment Corporation ("MPAC") Region 7 Respondent(s): North Kawartha Township

Property Location(s): Fire Route 10E Plan 11 PT LOT 5 RP Municipality(ies): North Kawartha Township Roll Number(s): 1536-020-001-43620-0000 Appeal Number(s): 2981391, 3018946 and 3073623 (deemed) Taxation Year(s): 2013, 2014 (and deemed 2015) Hearing Event No.: 568739

Legislative Authority: Section 40 of the Assessment Act, R.S.O. 1990, c. A.31, as amended

Heard: September 16, 2014 in Selwyn, Ontario

APPEARANCES:

Parties	Counsel+/Representative
Robert Gainey	Self-represented
MPAC	R. Bolton
North Kawartha Township	No one appeared

DECISION OF THE BOARD DELIVERED BY ROBERT TCHEGUS

Issues

1Is the assessment of the subject property correct at $928,000 for the 2013 taxation year and at $616,000 for the 2014 taxation year? Is the assessment equitable when compared with the assessments of similar properties in the vicinity?

DECISION

2The Assessment Review Board ("Board") is required by the Assessment Act ("Act") to do two things:

1. Section 44.(3)(a) requires the Board to "...determine the current value of the land." The Board accepts the recommendation of the assessor and finds that the current value of the subject property, as of the legislated valuation day, January 1, 2012 is $585,000.

2. Section 44.(3)(b) requires the Board to "...have reference to the value at which similar lands in the vicinity are assessed and adjust the assessment of the land to make it equitable with that of similar lands in the vicinity is such adjustments would result in a reduction of the assessment of the land." The Board finds that an assessment at the current value as determined above is equitable and no adjustment is required.

3The assessment value for the subject property is reduced from $928,000 to $585,000 for the 2013 taxation year and from $616,000 to $585,000 for the 2014 and 2015 taxation years.

REASONS FOR DECISION

The Subject Property

4The subject property is a vacant lot on Stoney Lake. While it has a "legal" frontage, depth and area of 580 feet, 991.31 feet and 3.09 acres respectively, MPAC has assessed the parcel to be 25% to 50% swamp, which changes the effective frontage to 170 feet, the effective depth to 400 feet and the effective area to 1.56 acres.

5The subject property has waterfrontage on Stoney Lake proper and a bay thereof, the bay being much shallower and weedier than the main body of the lake. Therefore, only 170 feet of the property's 580 feet of waterfrontage has been assessed. The property has seasonal access and MPAC for the purpose of its multiple regression model has further assigned it a steep slope and an average waterfront being weedy/algae. While hydro is available, at this time the property has no improvements.

The Position of MPAC

6Rebecca Bolton represented MPAC in this matter. She advised the Board that she valued the property by using what is known as the "direct sales comparison" approach. By this method, the assessed value of a property is derived from the sales prices of comparable properties. Adjustments are then made for differences in property characteristics that would increase or decrease the value. Adjustments are typically made for variations in location, quality, amenities, lot size, waterfront quality and other factors.

7Ms. Bolton provided evidence regarding the sales of two comparable vacant lots on Stoney Lake being on Whetung Road and 171 Fire Route 22. The properties sold in October of 2010 and July 2011 for prices of $1,000,000 and $710,000, respectively. These lots had effective frontages, depths and areas of 145 feet, 261 feet and 0.87 of an acre and 174 feet, 231.52 feet and 0.92 of an acre.

8Ms. Bolton testified that she reviewed the sales of 490 vacant properties from the neighbourhood of the subject property and from adjacent neighbourhoods and municipalities for the period of December 2008 to December 2012 to conclude that prices increased approximately 7.69% over this time frame. She calculated and applied time adjustment factors to her sale comparisons to ensure that the sales reflected the market conditions of January 1, 2012. Table 1 in the Price Changes over Time section of her documents provides the month-by-month time adjustment factors that she calculated.

9The time-adjusted sale prices for Whetung Road and 171 Fire Route 22 are $999,959 and $713,769, respectively and provide a range of values in which the subject property's current value as returned of $928,000 reasonably falls. It is her further recommendation that the amount of swamp, weedy waterfront and steep topography on the subject property further reduces this value to $585,000 for the 2013 and 2014 taxation years. She submitted that an assessment of $585,000 is reasonable and correct in the context of s. 40.(17) of the Act (supra) which places the burden of proof as to the correctness of the current value of the land on MPAC.

10To address equity and s. 44.(3)(b) of the Act, Ms. Bolton referred the Board to an Equity Analysis that calculated the assessment to sales ratio ("ASR") derived from 25 sales of residential properties within 14.35 kilometres of the subject property between December 2008 and December 2012. She advised that while the sales were not all necessarily vacant waterfront properties, all were typical, arms-length transactions between willing buyers and willing sellers. In this regard, she said that if MPAC's method of valuing properties is achieving equity, the average ASR should fall within 0.95 and 1.05. She confirmed a median ASR of 1.02 has been achieved.

11Ms. Bolton also advised that equity among individual properties is measured through the Coefficient of Dispersion ("COD"). The COD measures the average percentage deviation of all of the individual ratios from the median ratio. For residential properties, MPAC allows a maximum COD of 15%. It is 20% for commercial properties, 25% for vacant properties and 20% for seasonal recreational properties. In this instance the COD is 18.7. From her analysis, Ms. Bolton is of the opinion that similar properties are being assessed at their current values and that no equity adjustment is required.

The Position of the Appellant

12Robert Gainey submitted evidence of the sales of three properties. 810 Northey's Bay Road sold in August of 2013 for $365,000 having 300 feet of waterfront and a dwelling with 1,890 square feet.

1321 Fire Route 23 sold in December of 2012 for $400,000 having 149 feet of waterfront and a "Viceroy" cottage with an area of 1,500 square feet.

14The third property is a 4.6 acre lot having 260 feet of waterfront on the same bay as the subject property. This lot property sold in December of 2008 for $325,000.

15Mr. Gainey suggested that his second comparable property is most similar to the subject property and if one deducts $100,000 for the cottage, a value of $300,000 for the land would remain. He submitted that a current value of $350,000 for the subject property would be reasonable and correct.

16Mr. Gainey brought with him. Rob Welsh, who is a long time resident of Stoney Lake and familiar with the sales relied upon by MPAC. Mr. Welsh testified that the Whetung property was originally purchased at a price of $2,600,000 and then severed by the new owner into two lots. Admittedly, this is a prime piece of property being on a westerly facing point of land. Mr. Welsh evidence is that $1,600,000 was simply attributed to the retained lot and $1,000,000 to the severed lot. According to Mr. Welsh $1,000,000 sale is therefore not an arm's length open-market sale.

17Similarly, Mr. Welsh testified that the property forming part of the second sale together with other lands was originally acquired for $1,210,000. The property was then severed and the land upon which the original cottage was located was sold for $825,000. This would leave a remaining value for the vacant lot of $385,000. Mr. Welsh disputes the sales values of $1,000,000 and $710,000 that were provided by MPAC.

18In cross examination of Mr. Gainey, it became clear that the waterfront of his third comparable property is far inferior to that of the subject property. MPAC has assigned that property a "poor" waterfront rating. It also came out that the main reason the assessor is recommending a reduction in value is to deduct from the property's value that portion of its waterfront located on the bay.

19The bay is shallow and weedy as opposed to the waterfront on the lake proper. The effective waterfront of the subject property was reduced from the 580 feet as shown on Reference Plan No. 45R-11327 being Exhibit 5 to 170 feet. In light of the foregoing, MPAC's submits Mr. Gainey's use of a sale of property that only has waterfront on the bay is not fair as it is not a comparable sale.

Relevant Legislation

20For the 2013 and 2014 taxation years, in determining the value at which land shall be assessed, the Board must have regard to the following provisions of the Act:

21Section 1 of the Act states:

"current value" means, in relation to land, the amount of money the fee simple, if unencumbered, would realize if sold at arm's length by a willing seller to a willing buyer.

22Section 19.(1) of the Act states:

19.(1) Assessment based on current value. – The assessment of land shall be based on its current value.

23Section 19.2(1) 2 of the Act states:

19.2(1) Valuation days. – Subject to subsection (5), the day as of which land is valued for a taxation year is determined as follows:

2. For the period consisting of the four taxation years from 2009 to 2012, land is valued as of January 1, 2008.

3. For each subsequent period consisting of four consecutive taxation years, land is valued as of January 1 of the year preceding the first of those four taxation years.

24Section 44.(3) of the Act states:

44.(3) Same, 2009 and subsequent years. – For 2009 and subsequent taxation years, in determining the value at which any land shall be assessed, the Board shall,

(a) determine the current value of the land; and

(b) have reference to the value at which similar lands in the vicinity are assessed and adjust the assessment of the land to make it equitable with that of similar lands in the vicinity if such an adjustment would result in a reduction of the assessment of the land.

25Section 40.(17) of the Act states:

40.(17) Burden of proof. – For 2009 and subsequent taxation years, where value is a ground of appeal, the burden of proof as to the correctness of the current value of the land rests with the assessment corporation.

26Section 40.(19) of the Act states:

40.(19) Board to make determination. – After hearing the evidence and the submissions of the parties, the Board shall determine the matter.

The Board's Analysis – Burden of Proof

27The burden ascribed in s. 40.(17) is for MPAC to satisfy the Board that the assessment is reasonably correct. If it does so, then the onus shifts to the appellant to provide evidence to show either that the current value is not correct or that the assessment is not equitable when compared with the assessments of similar lands in the vicinity. The Board reviewed MPAC's evidence and finds that for the reasons provided below, MPAC has satisfied the burden of proof referred to in s. 40.(17) of the Act.

The Board's Deliberations

The Current Value of the Land

28The best evidence that the Board can receive of current value is an arm's length and market-tested sale of the subject property at or near the valuation day, being January 1, 2012, for the 2013 and 2014 taxation years.

29If, as in this case, no such transaction has taken place, the Board looks to sales of comparable properties in the vicinity to determine if the sales evidence suggests that a current value requires correction.

30The subject property is 3.09 acres in area. As noted, MPAC as a result of the amount of swamp, weedy waterfront and steep topography on the subject property, reduced the effective size to 1.56 acres. The first two properties submitted by Mr. Gainey for comparison purposes have areas of 0.81 of an acre and under 0.5 of an acre, respectively. Unlike the subject property, these two lots each have dwellings constructed on them, although the evidence is that the building on the latter property was demolished after sale. Regardless, the Board does not accept that these two properties are similar to the subject due to the difference in lot areas.

31The Board is also of the opinion that the vacant lot on the same bay as the subject property that sold in December of 2008 for $325,000 should not be used for sales comparison purposes. In determining current value Ms. Bolton reduced the effective frontage for the subject property so that it would only be assessed for its waterfront "proper" on Stoney Lake and not for its water frontage on the bay. The Board agrees with her submission that it would not therefore be fair for the appellant to compare it to a property with water frontage solely on the bay so he would doubly benefit from that property's lower value.

32This leaves only the two properties submitted by Ms. Bolton for comparison. Having time adjusted values of $999,559 and $713,769. Both of these properties are smaller and have less waterfront than the subject property albeit that the latter property has essentially the same dimensions as the effective dimensions assigned to the subject property. Mr. Welsh testified that this property was bought for $1,210,000 and then severed. The part with the cottage sold for $825,000 and he suggested that the remaining value for the vacant lot would be $385,000, but that does not take into account the fact that obtaining a severance may add value. That is, if the property sold for $1.21M as one piece, its value as two parcels should be greater than as one. Similarly, while Mr. Welsh does not believe that MPAC's first comparable property is a fair market transaction, as the Whetung property was originally purchased at a price of $2,600,000 and then severed by the new owner into two lots, its value as two parcels should be greater than as one.

33The reference plan survey of the property indicates that it has 580 feet of waterfront on Stoney Lake. MPAC has assessed it on the basis of it having 170 feet of effective waterfront. That leaves 410 feet on the bay and the appellant's third comparable property sold approximately three years prior to the relevant valuation day for $325,000 with 280 feet of waterfront on the bay. That sale price is equivalent to $1,160 per linear foot of waterfront. If one multiplies that by only the 410 feet of bay waterfront that the subject property has, a value of $475,892 is achieved. Applying MPAC's time adjustments to that amount brings the value as of January 1, 2012 to $485,886 and that does not take into account the prime 170 feet of waterfront that the property has on Stoney Lake.

34580 feet multiplied by the $1,160 per foot "bay" waterfront equals $672,000. As noted above, only 410 feet of the property is "bay" waterfront whereas the remaining 170 feet is prime waterfront. The Appellant's comparable sales evidence therefore suggests that applying that sale to the subject property would achieve a value of well over $672,000. The Board therefore accepts the recommendation of the assessor and determined the current value of the property to be $585,000 for the 2013 and 2014 taxation years.

Section 44.(3)(b) – Equity

35Systems of mass appraisal do not generate accurate current values for every property. A comparison of the ASR permits the Board to compare assessed values as determined by MPAC with the values achieved in the marketplace. An ASR of less than 1.00, arrived at by comparing a number of sales, would indicate that MPAC may be producing values less than the values demonstrated in the marketplace. An ASR greater than 1.00, again using a number of sales, indicates that MPAC may be producing values greater than those demonstrated in the marketplace. In this instance, the median ASR is 1.02 suggesting that MPAC is producing values at or very close to actual market values.

36Therefore, having regard to the assessments of similar lands in the vicinity, the Board finds that no equity adjustment is necessary to the current value assessment of the subject property.

2015 DEEMED APPEAL

37An appeal for the 2014 taxation year is presently before the Board. Section 40.(26) provides that the Appellant is deemed to have made the same appeal for the subsequent taxation year if the appeal is not finally disposed of before March 31 of the subsequent taxation year. The Board has not disposed of the 2014 appeal before March 31, 2015. For that reason, this decision also applies to the 2015 taxation year.

38Section 40.(26) of the Act directs:

Deemed appeals, 2009 and subsequent years

For 2009 and subsequent taxation years, an appellant shall be deemed to have brought the same appeal in respect of a property,

(a) in relation to the assessments under sections 32, 33 and 34 for the year; and

(b) in relation to the assessment, including assessments under sections 32, 33 and 34, for a subsequent taxation year to which the same general reassessment applies, if the appeal is not finally disposed of before March 31 of the subsequent taxation year or, if an assessment has been made under section 32, 33 or 34, before the 90th day after the notice of assessment was mailed.